Chapter 11 Flashcards
Cost allocation for plant and equipment
Depreciation
Allocation of the cost of natural resources
Depletion
Cost allocation for intangibles
Amortization
The estimated use that the company expects to receive from the asset
Service Life
The value of the usefulness that is expected to be consumed
Allocation Base
The pattern in which usefulness is expected to be consumed
Allocation Method
The amount the company expects to receive for the asset at the end of its service life less any anticipated disposal costs
Residual Value
Allocates the cost base according to the passage of time
Time-based Methods
Allocation of an asset’s cost base using a measure of the asset’s input or output
Allocation-based Method
An equal amount of depreciable base is allocated to each year of the asset’s service life
Straight Line
Systematic acceleration of depreciation by multiplying the depreciable base by a fraction that declines each year
Sum-of-the-years’- digits Method
200% of the straight-line rate is multiplied by book value
Double-declining Balance Method
Computes a depreciable rate per measure of activity and then multiplies this rate by actual activity to determine periodic depreciation
Units-of-production Method
Collection of assets defined as depreciable assets that share similar service lives and other attributes
Group Depreciation Method
Physically dissimilar assets are aggregated to gain the convenience of group depreciation
Composite Depreciation Method
